Even If Both Dividends and Capital Gains Are Taxed at the Same

question 59

Multiple Choice

Even if both dividends and capital gains are taxed at the same ordinary income tax rate, the effect of each type of tax is different because

• A)capital gains are actually taxed, while dividends are taxed on paper only.
• B)dividends are taxed when distributed, while capital gains are deferred until the stock is sold.
• C)both dividends and capital gains are taxed every year.
• D)capital gains are actually taxed, while dividends are taxed on paper; and both dividends and capital gains are taxed every year.

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Definitions:

Par Value

A nominal value assigned to a stock or bond, representing its face value rather than its market value.

Stock Split

This action increases the number of shares of a corporation by issuing more shares to current shareholders, which typically results in a decrease in the per-share price, making the stock more accessible to a wider range of investors.

Stock Split

A corporate action where a company divides its existing shares into multiple shares, effectively reducing the price of individual shares without changing the overall market capitalization.

Shares Outstanding

The total number of shares of a corporation's stock that are currently owned by all its shareholders, including share blocks held by institutional investors and restricted shares.